University Bancorp, Inc. (OTCQB: UNIB) announced its intention to acquire the remaining 20% of Midwest Loan Services Inc., a leading residential mortgage subservicer. This strategic move solidifies University Bancorp’s ownership of Midwest Loan Services, enhancing its position in the mortgage servicing industry. The acquisition reflects the significant value Midwest Loan Services brings to University Bancorp’s portfolio.
Midwest Loan Services: A Cornerstone of Profitability
Midwest Loan Services, based in Houghton, Michigan, manages over $15.8 billion in residential loans for more than 360 financial institutions nationwide. Its reputation for excellent customer service and cutting-edge technology has earned it exclusive endorsement from the American Bankers Association (ABA). This endorsement underscores Midwest Loan Services’ commitment to quality service and operational efficiency, as evidenced by its significantly lower complaint rate compared to the industry average, according to the Consumer Financial Protection Bureau (CFPB).
The acquisition of the remaining 20% stake from Midwest Loan Services’ founder, Ed Burger, values the company at $15.5 million. This represents a premium over Midwest Loan Services’ shareholder equity, reflecting its strong growth trajectory and the substantial escrow deposits it manages. These zero-interest escrow deposits, totaling approximately $190 million, provide University Bancorp with a significant source of potential profit as interest rates begin to rise.
Acquisition Details and Financial Impact
The acquisition will involve a combination of cash, newly issued University Bancorp common stock, and a potential interest earn-out based on the future performance of Midwest Loan Services’ escrow deposits. The transaction is expected to increase University Bancorp’s book value per share, further solidifying its financial strength. The interest earn-out component provides an incentive for continued growth and profitability at Midwest Loan Services, benefiting both the acquired company and University Bancorp. This structure aligns the interests of both parties and ensures a smooth transition of ownership.
University Bancorp anticipates completing the acquisition and holding a shareholder meeting to approve the necessary increase in authorized shares of common stock before the end of the year. The company is confident that this acquisition will significantly enhance its long-term value and profitability. The strategic importance of Midwest Loan Services to University Bancorp’s overall growth strategy cannot be overstated. This acquisition positions the bank for continued success in the evolving financial landscape.
Conclusion: A Strategic Move for Future Growth
The acquisition of Midwest Loan Services is a strategic move by University Bancorp to strengthen its position in the mortgage servicing industry. Midwest Loan Services’ strong reputation, proven track record, and significant escrow deposits make it a valuable asset for University Bancorp. By fully integrating Midwest Loan Services into its operations, University Bancorp is poised to capitalize on the growing mortgage market and enhance shareholder value. This acquisition represents a significant step forward in University Bancorp’s long-term growth strategy.
